Invoice finance fees for UK manufacturers — what to expect

Manufacturing ties up cash across long production cycles and bulk supplier costs. Invoice finance can free that cash quickly — but fees vary widely. This guide breaks down the charges UK manufacturers can expect when using invoice finance through UK Business Loans partners, gives a worked example and a checklist for negotiating fair terms. Complete our quick enquiry to compare tailored quotes from lenders and brokers: Get a Free Quote — No Obligation.

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TL;DR — Quick summary

• Primary fees: discount/finance rate (charged on invoices), service/administration fees, setup/origination fees, reserve/retention and credit-control costs.
• Typical ranges (indicative): discount rate 0.5%–3% per month (6%–36% APR equivalent); advance rates 70%–90%; reserves 5%–30%; service fees £50–£500/month or 0.1%–1% per invoice; onboarding £0–£1,000+.
• Non-recourse (bad-debt) cover costs extra and is often limited to buyer insolvency (not disputes).
• Actual fees depend on buyer credit, invoice volumes, debtor concentration and whether you choose factoring (disclosed) or invoice discounting (confidential).
• Figures are illustrative — get a Free Eligibility Check to compare full, personalised fee schedules.

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What is invoice finance and how manufacturers use it

Invoice finance unlocks cash tied up in unpaid invoices. Two common forms are factoring (the funder takes over credit control and collections and is disclosed to your customers) and invoice discounting (you retain collections and the facility is confidential).

Manufacturers use invoice finance to:

• Pay suppliers for raw materials and components without using overdraft limits;
• Bridge long production-to-payment cycles;
• Finance growth, meet seasonal demand, and take discounts from suppliers;
• Support expansion into new markets or fulfil large orders quickly.

If you want tailored quotes from lenders and brokers who specialise in manufacturing, start here: Get a Free Quote — No Obligation.

How invoice finance fees are structured

Fees are usually a combination of percentage-based charges and fixed fees. Lenders price facilities based on debtor risk, your sector and volumes — so expect a mix of ongoing charges and one‑offs. Below are the main fee categories you’ll see.

Detailed fees manufacturers should expect

Discount rate / finance charge

The discount rate (also called the finance fee) is the core cost and is usually expressed as a percentage of the invoice value. Some providers charge on the advanced amount; others on the whole invoice. Pricing can be quoted monthly (e.g., 1% per month) or as an annual equivalent.

Indicative range for manufacturers: 0.5%–3% per month (roughly 6%–36% APR equivalent). Manufacturers with large, stable blue‑chip customers often secure rates at the lower end; higher-risk debtors or long invoice ageing push rates up.

Advance rate and reserve / retention

The advance rate is the cash you receive upfront — typically 70%–90% of invoice face value. The reserve (retention) is withheld to cover disputes, returns and fees and is released when the debtor pays.

Reserve levels depend on buyer credit risk and concentration. Typical reserve: 5%–30% of invoice value. High concentration on a single buyer or international receivables often increases the reserve.

Service / administration fees

These cover ledger management, reporting, reconciliations and account handling. Some lenders charge per-invoice fees; others a monthly platform fee.

Typical amounts: 0.1%–1% per invoice or fixed monthly fees of £50–£500 depending on scale and provider. If your operation needs frequent statements or custom reporting, expect higher admin charges.

Onboarding / set-up / due diligence fees

One-off costs to set up the facility — legal documentation, searches, initial audits and KYC checks. Simpler, off-the-shelf facilities may have no charge; bespoke arrangements for larger manufacturers often incur fees.

Indicative: £0–£1,000+, sometimes higher for multi-site businesses or complex debtor portfolios.

Minimum monthly fees / account maintenance

Providers may set a minimum monthly fee if invoice volume is low. This ensures the facility remains viable for the funder.

Typical: £50–£500 per month. If your invoice flow is seasonal, negotiate a waiver or a sliding scale tied to turnover.

Credit control / collections fees

With disclosed factoring the funder usually handles collections; this service is charged separately or bundled into the service fee. Fees are often a small percentage of invoice value or included in the discount rate.

If you prefer to keep collections in-house (invoice discounting), you can avoid these charges but may pay slightly higher finance fees.

Bad‑debt protection / non‑recourse premium

Non‑recourse (bad‑debt) insurance protects you against buyer insolvency (not disputes). It is optional and adds cost — either as an increased discount rate, an additional premium, or a percentage of turnover.

Indicative extra cost: 0.1%–1% per month (or a separately quoted premium). Coverage and exclusions vary: many policies exclude disputes, partial payments or late‑payment scenarios.

Interest on funded advances / overdraft‑style interest

Some facilities operate like an overdraft — interest is charged on the drawn amount rather than a discount. Rates are usually a base rate plus margin and are calculated daily.

Check whether the provider uses simple or compound interest and how many days they count per month for fee calculations.

Transaction & banking charges

BACS, CHAPS, faster payments, returns processing and currency conversion (for exports) can generate small per-transaction fees.

Typical: £2–£20 per transfer plus FX margins where applicable.

Exit / early termination fees and legal costs

Early closure of a facility can trigger termination fees or recovery of legal costs; some funders require notice periods (e.g., 30–90 days).

Always check the small‑print for exit costs and whether outstanding administration costs will be deducted from your reserve.

Other possible fees (short list)

• Concentration fees (if one debtor represents too much of your ledger);
• Audit visit costs for large/bespoke facilities;
• System integration or API setup fees for accounting software;
• Courier / document handling or extra KYC refresh fees.

Illustrative example — mid-sized manufacturer

Assumptions (illustrative only): monthly invoicing £100,000; advance rate 80%; discount rate 1.5% per month; service fee 0.2% of invoices; reserve 10%.

• Advance paid: 80% of £100,000 = £80,000.
• Reserve retained: 10% of £100,000 = £10,000 (released on payment).
• Monthly discount fee: 1.5% of £100,000 = £1,500.
• Service fee: 0.2% of £100,000 = £200.
• Total monthly cost (approx): £1,700; effective monthly cost on cash advanced = £1,700 / £80,000 ≈ 2.125% (annualised >25%).

Notes: this example is conservative and ignores potential interest or insurance premia. Costs fall for higher volumes, stronger buyer credit, and competitive multi‑bid processes. For an exact quote, complete our short form: Get a Free Quote.

Choosing the right invoice finance offer — negotiation checklist for manufacturers

Before you sign, request a full, written fee schedule and compare apples with apples. Use this checklist when evaluating offers:

• Ask for an APR‑style summary or annualised cost example based on your invoices;
• Confirm whether fees are applied to invoice face value or the net advance;
• Check the advance rate and exact reserve release timing;
• Ask about minimum monthly fees and whether they apply seasonally;
• Clarify bad‑debt (non‑recourse) cover specifics and exclusions (insolvency vs disputes);
• Ask if fees increase with debtor concentration or for export invoices;
• Confirm onboarding, audit, and system integration fees up front;
• Request sample contract pages showing termination clauses and notice periods;
• Compare the net cash and timing: how quickly will funds reach your business after the invoice is raised?

Sector tips for manufacturing:

• Supply strong buyer credit information to reduce risk pricing;
• Spread debtor exposure where possible to reduce concentration fees;
• Consider combining invoice finance with buyer credit insurance for cheaper non‑recourse cover;
• Negotiate caps on admin fees or agree a tiered service fee as volumes grow.

Ready to compare tailored offers? Get a Free Eligibility Check.

How UK Business Loans helps manufacturing businesses

UK Business Loans does not lend. We introduce manufacturers to lenders and brokers who specialise in invoice finance. Our service is free to businesses and helps you:

• Save time by getting matched to partners that understand manufacturing cashflow;
• Receive multiple quotes so you can compare full fee schedules side‑by‑side;
• Understand fees clearly — we encourage partners to provide transparent, itemised pricing;
• Access facilities from £10,000 upwards to suit SMEs and larger manufacturers.

Complete our two‑minute enquiry and we’ll match you to the best lender or broker for your needs: Get a Free Quote — No Obligation.

Compliance note: UK Business Loans is an introducer — we are not a lender or regulated financial adviser. We pass your enquiry to selected lenders and brokers who will contact you with quotes.

Frequently asked questions

Will submitting an enquiry through UK Business Loans affect my credit score?

No. Making an enquiry on our site does not affect your credit score. Lenders or brokers may perform credit searches only if you proceed to an application with them.

How fast can I access cash with invoice finance?

Once a facility is approved, many manufacturers can access funds within 24–72 hours for established buyers. Onboarding time depends on checks, documentation and whether the facility is ongoing or spot factoring.

Are invoice finance fees tax‑deductible?

Generally, finance and service fees are allowable business expenses, but you should confirm treatment with your accountant for your specific situation.

How do fees differ between factoring and invoice discounting?

Factoring often includes credit control and collections costs and can therefore be more expensive than confidential invoice discounting, where you keep collections in‑house. Exact pricing depends on provider services and debtor risk.

Can I get non‑recourse invoice finance for manufacturing customers?

Yes — non‑recourse cover is available but typically costs more and depends on buyer credit quality. Many non‑recourse policies exclude disputes, so read exclusions carefully.

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Summary & next steps

Invoice finance can release vital working capital for UK manufacturers but expect a mix of discounting/interest charges, reserve and service fees. Costs vary with debtor credit, volumes and whether you choose factoring or discounting. The best approach is to compare full, itemised fee schedules from several providers.

Start now: complete our short form to receive matched quotes from lenders and brokers experienced with manufacturing: Get a Free Quote — No Obligation. For more on our sector services see our manufacturing page on manufacturing business loans.

1. What types of invoice finance are available for UK manufacturers?
– UK manufacturers can use factoring (disclosed, funder handles credit control), invoice discounting (confidential, you retain collections), spot/selective factoring and tailored debtor‑finance facilities.

2. How much does invoice finance typically cost for manufacturers?
– Costs vary but commonly include a discount/finance rate of about 0.5%–3% per month (≈6%–36% APR), plus service fees, reserves and possible onboarding or credit‑control charges.

3. What is an advance rate and reserve, and what should manufacturers expect?
– Advance rates are usually 70%–90% of invoice value with a reserve/retention of around 5%–30% held back to cover disputes, fees and eventual reconciliations.

4. How quickly can manufacturers access cash with invoice finance?
– Once a facility is approved many manufacturers can access funds within 24–72 hours for established buyers, though onboarding and due diligence can extend this.

5. Will submitting an enquiry through UK Business Loans affect my credit score?
– No — completing an enquiry on UK Business Loans is free and doesn’t affect your credit score; lenders only carry out credit checks if you proceed to an application.

6. Are invoice finance fees tax‑deductible for my business?
– Generally finance and service fees are allowable business expenses, but you should confirm the exact tax treatment with your accountant.

7. Can I get non‑recourse (bad‑debt) invoice finance as a manufacturer?
– Yes — non‑recourse protection is available but typically costs extra, depends on buyer credit quality, and often excludes disputes and partial payments.

8. How should I compare and negotiate invoice finance offers and fees?
– Ask for an itemised fee schedule and APR‑style example, confirm whether fees apply to the invoice face value or the advance, check reserve and minimum fee terms, and negotiate caps or tiered admin charges.

9. What documents and information do lenders usually require for invoice finance?
– Lenders commonly request company accounts, VAT returns, recent invoices and debtor lists, buyer credit information and KYC/business identity documentation for onboarding.

10. How does UK Business Loans help manufacturers find the right invoice finance provider?
– UK Business Loans matches your quick enquiry to trusted brokers and lenders who specialise in manufacturing, delivering multiple, no‑obligation quotes and transparent, itemised fee schedules to compare.